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How fast do personal computers depreciate? concepts and new estimates

  • Mark E. Doms
  • Wendy E. Dunn
  • Stephen D. Oliner
  • Daniel E. Sichel

This paper provides new estimates of depreciation rates for personal computers using an extensive database of prices of used PCs. Our results show that PCs lose roughly half their remaining value, on average, with each additional year of use. We decompose that decline into age-related depreciation and a revaluation effect, where the latter effect is driven by the steep ongoing drop in the constant-quality prices of newly-introduced PCs. Our results are directly applicable for measuring the depreciation of PCs in the National Income and Product Accounts (NIPAs) and were incorporated into the December 2003 comprehensive NIPA revision. Regarding tax policy, our estimates suggest that the current tax depreciation schedule for PCs closely tracks the actual loss of value in a zero-inflation environment. However, because the tax code is not indexed for inflation, the tax allowances would be too small in present value for inflation rates above the very low level now prevailing.

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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2004-31.

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Date of creation: 2004
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Handle: RePEc:fip:fedgfe:2004-31
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  1. Alan J. Auerbach, 1980. "Tax Neutrality and the Social Discount Rate: A Suggested Framework," NBER Working Papers 0457, National Bureau of Economic Research, Inc.
  2. Ernst R. Berndt & Neal J. Rappaport, 2001. "Price and Quality of Desktop and Mobile Personal Computers: A Quarter-Century Historical Overview," American Economic Review, American Economic Association, vol. 91(2), pages 268-273, May.
  3. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  4. Jane G. Gravelle, 1994. "The Economic Effects of Taxing Capital Income," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262071584, June.
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